British embassy in Baghdad hit by mortar attack minutes before Blair's arrival

Downing Street said there was nothing to suggest Mr Blair was the target of the attack - said to be a regular occurrence.

Officials followed the usual practice of not confirming exactly where the shell landed. Mr Blair's official spokesman said: "We are not pretending this isn't an occurrence that happens on a fairly regular basis.

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"We have no information to suggest anything other than the usual business."

The British Embassy in the zone has in the past come under mortar attack, said UK military sources.

The secrecy and security surrounding Mr Blair's latest visit to Iraq has been characteristically tight, with news of his arrival released only after he was already in Baghdad.

Speaking after talks with Iraqi Prime Minister Nouri Maliki and President Jalal Talabani, Mr Blair insisted there were "real signs of change and progress" in Iraq - despite the deadly violence scarring daily life in the capital.

"There are mortar attacks and terrorist attacks happening every day, that's the reality. The question is, what are we going to do in the face of these attacks?

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"The answer is, we don't give in to them. The very purpose of the attacks, the suicide bombs, the mortars aimed in here, is so that you will carry nothing but that on your news and won't actually talk about the progress that's happening here."

The Prime Minister said: "Plainly the security situation remains very difficult but on the other hand there are real signs of change and progress also."

Mr Blair said of this morning's talks: "We agreed that what was required was a real sense of an agreement that brought everyone together for the way forward.

"And that it was important not just that that idea of a national compact for the country was agreed here inside Iraq but that at the same time it was agreed it should be adhered to by the neighbouring countries."

Iran has frequently been accused of supporting and supplying insurgent groups inside Iraq.

Mr Blair insisted: "The future of Iraq should be determined by Iraqis in accordance with their wishes, and it's important that all the neighbouring countries respect that.

"There are things that are happening in different parts of Iraq that do give us cause for hope, for the prospects of reconciliation between people, but it is important we continue to take whatever action is necessary against al Qaida or against anyone who would use violence and terrorism to thwart the progress of the country."

The spokesman said Sunni and Shia leaders were now having regular meetings with the elected Iraqi leadership and there were some signs that tribal leaders were turning against al Qaida and trying to take control of their own communities.

The spokesman added: "The next few months are crucial in building on that momentum.

"What the Prime Minister will want to highlight in this visit is the fundamental link between politics and security."

The spokesman said the aim was to use "the momentum in Iraqi's politics to create the space for long-term peace".

And he added: "What he will be pushing for is a qualitative shift to the work of reconciliation."

With Iraq inevitably casting a shadow over his legacy after a decade in Downing Street, Mr Blair will be keen to stress the political progress he believes holds out at least the prospect of a lasting peace there.